Increasing cotton prices forecast

As prices of cotton increase, so will the impact on producers (especially home textiles in Pakistan), and eventually on consumers.

The problem is a classic supply and demand imbalance, with the price of cotton rising almost 80 percent since July and prices expected to remain high. “World cotton production is unlikely to catch up with consumption for at least two years,” said Sharon Johnson, senior cotton analyst with the First Capital Group, in an e-mail.

Cotton inventories had been low because of weak demand during the recession. This summer, new cotton crops were also depleted because of flooding in Pakistan and bad weather in China and India, all major cotton producers.

But demand from China, in particular, was rising. And as the economic recovery in the United States began, apparel makers and retailers placed orders for more inventory, spurring even more demand. As prices rose, speculators entered the market, driving prices even higher.